MPs reject plea for consumer protection

UNDER SCRUTINY: Vodafone has been fined in New Zealand and Harvey Norman faces action in Australia.

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Pleas to make it easier for the Commerce Commission to ping Kiwi retailers who mislead consumers appear to have failed.

Sweeping changes to New Zealand's consumer laws now look unlikely to grant the commission the power to issue the Australian-style infringement notices and fines it had asked for.

Australia's fair trading watchdog, the Australian Competition and Consumer Commission (ACCC), is taking court action against nine franchises of appliance retailer Harvey Norman for allegedly misleading customers about their rights of return - part of a string of enforcement actions over the ditch involving allegations against major retailers.

The Aussie watchdog also has the option of issuing infringement notices and fines, akin to speeding tickets, such as six totalling A$61,200 (NZ$71,000) paid by Australia's Coles supermarkets this month for allegedly displaying imported fruit under an "Australian-grown" symbol.

Retailers can pay the penalties without admitting guilt.

The New Zealand commission asked the Commerce Select Committee for wider powers to be added to the Consumer Law Reform Bill, saying infringements gave the ACCC a quick, low-cost way of tackling matters it might otherwise have to ignore or fight in expensive court actions.

"It can be an incentive for traders to change their behaviour without any major impact on their business," it said.

In New Zealand, shoppers' advocate Consumer NZ says that not a day goes by without phone calls from people who believe they've been misled about their rights. It is disappointed allegations about misleading brochures against Harvey Norman's rivals, Noel Leeming and Bond and Bond, were resolved last year without financial penalty.

"Even though the Consumer Guarantees Act [CGA] has been in place for 20 years now there are many retailers out there who are not aware of their obligations," said Consumer's Jessica Wilson.

"The substance of what the ACCC is prosecuting - the failure to provide customers with accurate information about their rights under consumer law - . . . is the bread and butter stuff of the complaints we get here."

Wilson questioned the effectiveness of new consumer laws in the absence of easier enforcement powers, given 20-year-old laws still appear to be regularly flouted.

In 2007 and 2012 Consumer's mystery shoppers found retail staff routinely misled people about their rights in a bid to sell costly extended warranties, and there was little discernible improvement over the five years.

Last March, Consumer tipped off the commission that brochures from the retailers appeared to breach the Fair Trading Act (FTA).

The commission responded that no further action was needed because the stores were prepared to listen and agreed to change their brochures.

But Consumer said imposing financial penalties and the resulting publicity in such cases would be a stronger deterrent.

"We thought it was a clear-cut breach of the FTA and the brochures were not accurate. We would have liked to see some stronger action," said Wilson.

"Rather than [having to] go to court and establish it we'd like to see some hard and fast penalties put in place to show that the law means something."

The ACCC can issue infringement notices for most consumer law offences, including some types of misleading conduct.

Between early 2010 and early 2012 it used its powers to ping companies 75 times for a total of A$450,000 for allegedly promoting fake product testimonials, sneaky fineprint, advertising items the retailer didn't stock and policies refusing exchanges, refunds or credit on sale items and other illegal conduct.

The New Zealand reform bill, which has passed its second reading, confers the power to issue infringement notices for a limited number of defined offences, such as failing to set out consumer law rights on the front page of extended warranty contracts.

The maximum fine for an infringement has been raised to $2000, less than a third of the Australian maximum for a corporation of A$6600 or A$66,000 for a listed company.

Consumer also told the select committee it should consider letting the commission directly enforce the Consumer Guarantees Act because shoppers and retailers often did not understand the law, but the suggestion was not adopted.

It is up to individuals to enforce the act, which contains protections such as the right to return faulty products, but the commission can prosecute retailers under fair trading law if they mislead customers about their rights. In less serious cases it can issue warnings and compliance letters.

A 2010 Ministry of Consumer Affairs paper on enforcing fair trading law said the offence of misleading or deceptive conduct required "careful factual analysis" and there might be conflicting evidence.

It recommended adding only a handful of minor and clearcut infringement offences to the commission's powers, for example, failure to comply with a product recall notice.

Lawmakers are often wary of expanding infringement powers too widely because they remove an individual's right to go through the court process.

However, the commission told the select committee Australia had safeguards in place to make sure the powers were used consistently and justifiably.